The CFA Franc effect on trade

Mignamissi, Dieudonné (2020): The CFA Franc effect on trade.

Abstract

This paper aims to assess the effect of sharing the CFA franc on bilateral trade in the Afri-can Franc Zone (AFZ) since 1995. In the light of the endogenous theory of optimum cur-rency, we estimate an augmented gravity model with the Poisson Pseudo Maximum Like-lihood estimator, and obtain two major results: (i) the effect of CFA on the bilateral trade of the African Franc Zone member countries is positive, but different in the two zones, because of the specific characteristics of the countries; (ii) based on three modeled scenar-ios ("Aggregation", "Cooperation" and "Consolidation"), the results finally show that the two zones would all win if they merged to form a consolidated monetary union, which would tend to justify the ongoing reforms

• Item Type: MPRA Paper
• Language: English
• Keywords: African franc zone, CFA Franc, Bilateral trade, Gravity model
• Subjects: F - International Economics > F1 - Trade; F - International Economics > F1 - Trade > F15 - Economic Integration

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